2009 In-House Fulfillment Systems Report

Publishers continue to demand a growing range of control, flexibility and customer integration.

By Chandra Johnson-Greene
Monday, July 6, 2009

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[Click here to view accompanying charts and supplier contact info.]

Don’t be alarmed by the 8.8 percent decrease in active installations in this year’s report. The numbers are slightly skewed after we omitted NexTech Systems and Satisfaction Software for not updating with us for some time. Smaller publishers are still dominating the companies’ client lists and are looking for Web-based software that will help them get a broader view of their customers and allow them to communicate with and serve their readers online.

To highlight the growing demand from publishers that in-house fulfillment systems offer more innovative features, AD added some new functions to its report: Web Newsletter Management, Digital Edition Reporting, Premium Offers and Fulfillment, Campaign and Promotion Tracking, and Centralized Database. As you’ll find in the report, most of the companies listed are offering these features.

And to further explore how publishers are molding their in-house fulfillment systems to fit the changing landscape of the print industry, AD spoke with the two companies on opposite sides of the spectrum—one that’s just making the switch from outsourcing its fulfillment to in-house, and one that’s been using in-house fulfillment quite robustly during that past few years to manage its expanding portfolio of products.

THE SEARCH FOR FLEXIBLE SOFTWARE

Michael Solovy, president and publisher, LuxDesign Magazine, was recently in the market for an in-house fulfillment system. LuxDesign, a quarterly title that highlights luxury homes and design in the Twin Cities, up until now, had a controlled circulation of 25,000 readers, but the company decided to transition to paid. “Our hope is to convert a majority of our 25,000 readers to paid subscribers with our VIP subscriber program,” Solovy says. “In addition, we want to tap additional prospective readers that may not receive it today, but might like to subscribe.”

Solovy felt that because of LuxDesign’s small volume, it didn’t make sense to outsource fulfillment. “Until this point, our magazine was sent out to a qualified list of homeowners based on certain demographics,” he told AD. “Based on the number of subscribers we plan to have in the first year, in-house fulfillment will provide the highest ROI.”  

Thus began the search for software that could support online subscription orders, capture customer data, and handle payment transactions and e-renewals. “We were looking for a company that had Web-based software and would easily integrate with our Web site,” Solovy says. “This would eliminate the need for expensive servers and allow us to access subscription data from anywhere in the world.  Additionally, our subscription process will be 100 percent Web-based so we can save money on data entry, envelopes, invoices and postage.”

The only negative that comes with the plan, Solovy added, is that there will be some readers who are used to subscribing by mailing in business replay cards and aren’t comfortable with entering their credit card information online. “For those people, we will have another option,” he says.

So Solovy did some research and narrowed down his list to three companies before making a decision, he says, which was based on cost and flexibility as well as the software’s ability to grow as LuxDesign’s subscriptions grew.

And although Solovy has more control with an in-house system, it doesn’t mean he won’t be expecting some help from his software provider. “I expect them to help me get my Web site integrated with their software and be able to troubleshoot any issues,” he says. “I also expect them to be prompt with any issues that my customers have.”

HOW IN-HOUSE SYSTEMS CAN HELP WITH INTEGRATION

Agora Inc. not only publishes magazines, newsletters, and e-newsletters in various countries, it also manufactures nutritional supplements and produces videos, books and conferences related to finance, travel and health. The company currently has about 4 million free e-newsletter subscribers and 850,000 active paid subscribers.

About four years ago, Agora went from a hybrid of in-house and outsourced fulfillment to a complete in-house fulfillment system that was put at the center of different modules, such as an email system, according to Daryl Berver, president of the company’s Publishing Services group. “With the [in-house] system at the center, we have a single view of all of our customers across all affiliates and product lines,” he told AD. “So we could see a customer who might be in the continuity program for our nutritional supplements and find out that he’s also subscribing to our free e-newsletters.”

Having all of their customers’ information in one database was only fitting for Agora. “We’re a very fast-paced, marketing-driven company and when we were using our previous systems, they kind of held us back,” Berver says. “We had to have so many crazy work-arounds in place to do what we wanted. We made it work through the old system, but having more flexibility now helps.”

Agora has seen 20-plus percent year-over-year growth during the past seven years, but has kept the same amount of staff, according to Berver, and having an in-house fulfillment system has accommodated the change. “We moved from a print-only shop to offering more electronic products,” he says. “We increased the number of publications we offer and the system was able to adjust to more subscriptions and more complex communication with our customers.”

The company has also taken advantage of the system’s ability to be managed in various languages—Agora has offices in Paris and the UK. “That’s one of the things that’s most unique about the system we use,” Berver says. “We can all use the same database and share the same system, but the employees in Paris see the screen in French while we see it in English.”

In the future, Berver says the company wants to go from a subscription-based model to an “access” model and he’s depending on his software to help him do that.
“[Our vendor] has an access maintenance and billing function that allows us to offer our customers access to our Web site for a fee as opposed to buying a traditional subscription,” he says. “That kind of model is arcane in the electronic world. We want to be able to offer our customers as much content as they want for a set period of time as opposed to offering just 52 e-newsletters in one year. We just need to migrate our publications to that system, which is easier said than done.”

AVOIDING IN-HOUSE FULFILLMENT PITFALLS

Although in-house fulfillment has been known as the pricier option, some are giving it another look during this sour economy. In-house fulfillment allows publishers to have more control of their printing, mailing and marketing costs, plus smaller companies can hire and train less experienced employees to run the systems. But there are a few pitfalls to avoid when choosing this option, according to circulation consultant Debra Schulle:

INVEST IN SKILLED STAFF

When switching to in-house systems, some small publishers hire customer service clerks to run them instead of more experienced staff. This can cause trouble down the road, Schulle told AD.

“These people may understand the basic mechanics of the system, but they may make mistakes such as forgetting to use tracking codes,” she says. “And even if that person does do a good job, what happens if he or she leaves the company? The publisher has to start all over again and train someone else from scratch.”

Schulle says that hiring an experienced employee or a circulation consultant, although more expensive at the beginning, may save the company money in the long run because that person will be more nimble with the system.

STAY ON TOP OF AUDITING AND POSTAL CHANGES

Fulfillment service bureaus, for the most part, keep their clients informed of any postal or auditing changes as soon as they happen. That luxury is lost when a publisher goes in-house, Schulle says. “A lot of publishers don’t find out about important changes until later, which may cost them money,” she says. “Luckily, changes at BPA, for example, have loosened the rules as opposed to tightening them, which has helped publishers.”

Schulle says to make sure that whoever is running the system stays updated on all changes, or purchase in-house fulfillment software that provides automatic updates on rule changes.

WEIGH THE PROS AND CONS

While publishers with in-house fulfillment systems gain more control and flexibility, Schulle says those thinking about making the change should be prepared for what they won’t get.

“I’ve heard clients say they’re having a rough time because they’re not getting the accounting and marketing reports they want,” she says. “They also miss the customer service management from outsourcing their fulfillment.”

However, take heed from the companies that are doing in-house fulfillment and are doing it well, she advises. “It all comes down to what’s best for the company,” she says. “Make sure the person that is making the decisions [about the system] is an implementer and a thinker, not a pie-in-the-sky marketing person. If you have someone with no experience in business operations running the system, it will not be successful.”